The following procedures are used by Complete Wholesale Incorporated. a. All sales are made on account, with each sale being indicated on a sequentially numbered sales invoice. b. Customer payments are received in the mail by the office receptionist, who sends the checks to a cashier for deposit and the remittance advices to the accounting department for recording against the customer’s account balance. c. The office receptionist is assigned the job of handling all customer complaints. d. When a customer has a legitimate complaint about goods sold to the customer on account, the receptionist will phone the accounting department to request that the customer’s account be credited for the sales allowance. e. The company’s inventory is stored in a locked warehouse that is monitored by surveillance cameras. f. Payments to the company’s suppliers are made only after the supplier’s invoice is received and compared to the receiving report. Required: 1. Indicate whether each procedure represents a strength or weakness. Explain your reasons. 2. For each weakness, describe a change in procedures that would address the weakness.
> The income statement and selected balance sheet information for Calendars Incorporated for the year ended December 31 are presented below Required: Prepare the cash flows from operating activities section of the statement of cash flows using the indire
> For each of the following transactions, indicate whether operating (O), investing (I), or financing activities (F) are affected and whether the effect is a cash inflow (+) or outflow (−). Use (NE) if the transaction has no effect on cas
> For each of the following situations, indicate whether it represents an accounting error and explain why it is or is not an error. Also state whether a trial balance would indicate that an error exists for each situation. a. Cash received from a custome
> Two music companies reported the following in their financial statements: Required: 1. Compute the 2018 ROE for each company (express ROE as a percentage rounded to one decimal place). Which company appears to generate greater returns on stockholders&a
> Carlos Company had the following stock outstanding and Retained Earnings at December 31, 2018: On December 31, 2018, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were de
> At December 31, the records of Seacrest Enterprises provided the following selected and incomplete data: Required: 1. Complete the following: Shares issued . Shares outstanding . 2. The balance in Additional Paid-In Capital would be $ . 3. Earnings p
> What aspect(s) of the Sarbanes-Oxley Act might counteract the incentive to commit fraud?
> Yougi Corp. is an animation studio that issued the following recent press release: Required: 1. Prepare any journal entries that Yougi Corp. should make on the four dates mentioned in the press release. 2. What two requirements would the board of dire
> Whyville Corporation obtained its charter from the state in January that authorized 500,000 shares of common stock, $1 par value. During the first year, the company earned $58,000, declared no dividends, and the following selected transactions occurred i
> Zarina Corp. signed a new installment note on January 1, 2018, and deposited the proceeds of $15,000 in its bank account. The note has a two-year term, compounds 4 percent interest annually, and requires an annual installment payment on December 31. Zari
> Assume the same facts as PB10-6, but now assume that Methodical uses the simplified effectiveinterest bond amortization method, as shown in Chapter Supplement 10C. Required: 1. Prepare a bond amortization schedule. 2. Give the journal entry to record
> Refer to PB10-6. Assume Methodical uses the effective-interest bond amortization method. Required: 1. Prepare a bond amortization schedule. 2. Give the journal entry to record the bond issue. 3. Give the journal entries to record the interest payments
> On January 1, 2018, Methodical Manufacturing issued 100 bonds, each with a face value of $1,000, a stated interest rate of 5 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 4
> Refer to M10-20. Welton Corp. established the note on the first day of its fiscal year and will fully repay the note by the end of year 3 on its December 31 fiscal year-end. Prepare Welton Corp.’s journal entries on (a) January 1, Year 1; (b) December 31
> AMC Entertainment, Inc., owns and operates movie theaters worldwide. Assume the company issued 4 percent bonds at their $53,000,000 face value and then used all of these cash proceeds to retire bonds with a stated interest rate of 6 percent. At that time
> Marshalls Corporation completed a $500,000, 7 percent bond issue on January 1, 2018. The bonds pay interest each December 31 and mature 10 years from January 1, 2018. Required: For each of the three independent cases that follow, provide the amounts t
> Sandler Company completed the following two transactions. The annual accounting period ends December 31. a. On December 31, calculated the payroll, which indicates gross earnings for wages ($260,000), payroll deductions for income tax ($28,000), payroll
> Using data from PB10-1, complete the following requirements. Required: 1. Prepare journal entries for each of the transactions through August 1. 2. Prepare any adjusting entries required on December 31. 3. Show how all of the liabilities arising fr
> Why would managers misrepresent the financial results of their companies?
> Tiger Company completed the following transactions. The annual accounting period ends December 31 Required: 1. For each listed transaction and related adjusting entry, indicate the accounts, amounts, and effects (+ for increase, − for
> The following transactions and adjusting entries were completed by a local delivery company called Fast Delivery. The company uses straight-line depreciation for delivery vehicles, double-declining-balance depreciation for buildings, and straight-line am
> Rudy’s Restaurant Company (RRC) entered into the following transactions during a recent year. Required: 1. Analyze the accounting equation effects and record journal entries for each of the transactions. 2. For the tangible and intan
> During the current year, Rayon Corporation disposed of two different assets. On January 1, prior to their disposal, the accounts reflected the following: The machines were disposed of in the following ways: a. Machine A: Sold on January 2 for $33,500 c
> At the beginning of the year, Oakmont Company bought three used machines from American Manufacturing, Inc. The machines immediately were overhauled, were installed, and started operating. Because the machines were different, each was recorded separately
> Access an online loan calculator with annual payments, such as the one at mycalculators.com, to produce an amortization schedule for Welton Corp.’s installment note that has original principal of $25,000, interest of 6 percent compounded annually, and a
> J. M. Smucker is well known for its fruit jams and Seneca Foods Corporation is the company behind Green Giant canned vegetables. To evaluate their ability to collect on credit sales, consider the following rounded information in their annual reports (amo
> Elite Events Corporation has provided event planning services for several years. The company has been using the percentage of credit sales method to estimate bad debts but switched at the end of the first quarter to the aging of accounts receivable metho
> Stinson Company recently agreed to loan an employee $100,000 for the purchase of a new house. The loan was executed on May 31, 2018, and is a one-year, 6 percent note, with interest payments required on November 30, 2018, and May 31, 2019. Stinson issues
> Xerox Corporation is the company that made the photocopier popular, but since then has grown a new business related to business process outsourcing. It recently disclosed the following information concerning the Allowance for Doubtful Accounts on its For
> Chipman Sofware recently reported the following amounts in its unadjusted trial balance at its year-end: Required: 1. Chip man uses ¼ of 1 percent of sales to estimate its Bad Debt Expense for the year. Prepare the adjusting journal entr
> (Supplement 5A) What are the arguments for and against replenishing all petty cash funds at the end of each accounting period?
> Spears & Cantrell announced inventory had been overstated by $30 at the end of its second quarter. The error wasn’t discovered and corrected in the company’s periodic inventory system until after the end of the thi
> Using the information in PB7-1, calculate the cost of goods sold and ending inventory for Mojo Industries assuming it applies the LIFO cost method perpetually at the time of each sale. Compare these amounts to the periodic LIFO calculations in requiremen
> Amazon.com reported the following amounts in its financial statements (in millions): Required: 1. Determine the inventory turnover ratio and average days to sell inventory for 2015 and 2014. Round to one decimal place. 2. Comment on any changes in the
> Mondetta Clothing prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to evaluate the net realizable value of its ending inventory. The preliminary income statement follows: Assum
> Refer to M10-18. Prepare CCC’s required journal entries on (a) January 1, 2018; (b) December 31, 2018; (c) December 31, 2019; (d) December 31, 2020; and (e) December 31, 2021. Data from M10-18: The following amortization schedule indi
> Mojo Industries tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the foll
> Sigfusson Supplies reported beginning inventory of 100 units, for a total cost of $2,000. The company had the following transactions during the month: Required: 1. Prepare the journal entries that would be recorded using a periodic inventory system. 2
> Emily’s Greenhouse Corporation is a local greenhouse organized 10 years ago as a corporation. The bookkeeper prepared the following statement at year-end (assume that all amounts are correct, but note the incorrect format): Required:
> Sky Communcations (SKY) usually sells a cell phone for $320 plus 12 months of cellular service for $480. SKY has a special, time-limited offer in which it gives the phone for free and sells the 12 months of cellular service for $420. Each phone costs SKY
> Larry’s Building Supplies (LBS) is a local hardware store. LBS uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis: a. Sold merchandise for cash (cost of merchandise $224,350). $500,000 b. Received
> Use the information in PB6-1 to complete the following requirements. Required: 1. For each of the events (a) through (c), indicate the amount and direction of the effect (+ for increase, − for decrease, and NE for no effect) on SSG i
> Define restricted cash and indicate how it should be reported on the balance sheet
> If you deposit $1,000 at the end of each period for 10 interest periods and you earn 8 percent interest, how much would you have at the end of period 10? Use a convenient format to display your computations and round to the nearest dollar.
> The transactions listed below are typical of those involving Southern Sporting Goods (SSG) and Sports R Us (SRU). SSG is a wholesale merchandiser and SRU is a retail merchandiser. Assume all sales of merchandise from SSG to SRU are made with terms n/30,
> Service World maintains a petty cash fund. The fund custodian encountered the following events. a. The fund was established when a check for $300 was cashed and deposited into a locked cash box. b. An employee submitted a receipt for a customer deliver
> The following amortization schedule indicates the interest and principal that Chip’s Cookie Corporation (CCC) must repay on an installment note established January 1, 2018. CCC has a December 31 year-end and makes the required annual pa
> The September bank statement and cash T-account for Terrick Company follow: There were no deposits in transit or outstanding checks at August 31. Required: 1. Identify and list the deposits in transit at the end of September. 2. Identify and list th
> The bookkeeper at Tony Company has asked you to prepare a bank reconciliation as of February 29. The February bank statement and the February T-account for cash showed the following (summarized): Tony Company’s bank reconciliation at t
> Learn to Play, Inc., is a one-person company that provides private piano lessons. Its unadjusted trial balance at December 31, 2018, follows, along with information about selected accounts. Required: 1. Calculate the (preliminary) unadjusted net income
> Indicate the accounting equation effects (amount and direction) of each adjusting journal entry. Use + for increase, − for decrease, and NE for no effect. Provide an appropriate account name for any revenue and expense effects. Data f
> Cactus Company’s annual accounting year ends on June 30. Assume it is now June 30 and all of the entries except the following adjusting journal entries have been made: a. The company earned service revenue of $2,000 on a special job that was completed J
> Regis Corporation operates hair salons under various brand names including Supercuts, Mia & Maxx, and Style America. The following is a simplified list of accounts and amounts (in millions) reported in the company’s accounts for the
> The following items present a sample of business activities involving Dry Cleaner Corporation (DCC) for the year ended December 31. DCC provides cleaning services for individual customers and for employees of several large companies in the city. Dec 1
> Define cash and cash equivalents and indicate the types of items that should be reported as cash and cash equivalents.
> Jessica Pothier opened FunFlatables on June 1. The company rents out moon walks and inflatable slides for parties and corporate events. The company also has obtained the use of an abandoned ice rink located in a local shopping mall, where its rental prod
> On January 1, 2018, Buchheit Enterprises reported $95,000 in a liability called “Bonds Payable, Net.” This liability related to a $100,000 bond with a stated interest rate of 5 percent that was issued when the market interest rate was 6 percent. Assuming
> Robin Harrington established Time Definite Delivery on January 1. The following transactions occurred during the company’s most recent quarter. a. Issued common stock for $80,000. b. Provided delivery service to customers, receiving $16,000 in cash and
> Abercrombie & Fitch Co. (ANF) is a specialty retailer of casual apparel. The following is a series of accounts for ANF. The accounts are listed alphabetically and numbered for identification. Following the accounts is a series of transact
> Starbucks is a coffee company—a big coffee company. During a 10-year period, the number of Starbucks locations in China grew from 24 to over 1,000. The following is adapted from Starbucks’s annual report for the year e
> Bearings & Brakes Corporation (B&B) was incorporated as a private company. The company’s accounts included the following at June 30: During the month of July, the company had the following activities: a. Issued 6,000 shares of
> Swish Watch Corporation manufactures, sells, and services expensive watches. The company has been in business for three years. At the end of the previous year, the accounting records reported total assets of $2,255,000 and total liabilities of $1,780,000
> 1. Did Cheese Factory’s cash balance increase or decrease during the year ended August 31, 2018? Which financial statement shows the reasons for this change? 2. What would Cheese Factory’s 2018 net income have been ha
> Cheese Factory Incorporated reported the following information for the fiscal year ended August 31, 2018. Required: Prepare the four basic financial statements for the fiscal year ended August 31, 2018.
> 1. Is the company financed mainly by creditors or stockholders? Which financial statement provides the information to answer this question? 2. Was the company profitable? Which financial statement provides the information to answer this question? 3. By
> Moseby Corporation purchased equipment and in exchange signed a two-year promissory note. The note requires Moseby to make equal annual payments of $30,000 at the end of each of the next two years. Moseby has other promissory notes that charge interest
> What are the purposes of a bank reconciliation? What balances are reconciled?
> Clem Company issued $800,000, 10-year, 5 percent bonds on January 1, 2018. The bonds sold for $741,000. Interest is payable annually on December 31. Using effective-interest amortization, prepare journal entries to record (a) the bond issuance on January
> Given the following information, calculate cost of goods available for sale and ending inventory, then sales, cost of goods sold, and gross profit, under FIFO. Assume a periodic inventory system is used
> Peabody Corporation purchased equipment and in exchange signed a three-year promissory note. The note requires Peabody to make a single payment of $20,000 in three years. Peabody has other promissory notes that charge interest at the annual rate of 6 per
> PAC-1 Comparing Options Using Present Value Concepts After completing a long and successful career as senior partner at Pearson Hardman, you are preparing for retirement. After visiting the human resources office, you have found that you have several ret
> You have the opportunity to invest $10,000 in one of two companies from a single industry. The only information you have is shown here. The word high refers to the top third of the industry; average is the middle third; low is the bottom third. Required
> The financial statements for Royale and Cavalier companies are summarized here: These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years. Both companies received an unqualified au
> Coke and Pepsi are well-known international brands. Coca-Cola Co. sells more than $42 billion each year while annual sales of PepsiCo products exceed $62 billion. Compare the two companies as a potential investment based on the following ratiosÂ&nb
> A condensed income statement for Simulates Corporation and a partially completed vertical analysis are presented below Required: 1. Complete the vertical analysis by computing each line item (a)–(f) as a percentage of sales revenues.
> A condensed balance sheet for Simultech Corporation and a partially completed vertical analysis are presented below. Required: 1. Complete the vertical analysis by computing each line item (a)–(d) as a percentage of total assets. Roun
> Use the data given in PA13-1 for Pinnacle Plus. Required: 1. Compute the gross profit percentage in the current and previous years. Round the percentages to one decimal place. Are the current year results better, or worse, than those for the previous
> Pinnacle Plus declared and paid a cash dividend of $6,600 in the current year. Its comparative financial statements, prepared at December 31, reported the following summarized information: Required: 1. Complete the two final columns shown beside each i
> Assume the same facts as PA12-4, except for the income statement and additional data item (a). The new income statement is shown below. Instead of item (a) from PA12-4, assume that the company bought new equipment for $1,800 cash and sold existing equipm
> Sim ko Company issued $600,000, 10-year, 5 percent bonds on January 1, 2018. The bonds were issued for $580,000. Interest is payable annually on December 31. Using straight-line amortization, prepare journal entries to record (a) the bond issuance on Jan
> What is the primary internal control goal for cash payments?
> Refer to PA12-4. Required: Complete requirements 1 and 2 using the direct method Heads Up Company was started several years ago by two hockey instructors. The company’s comparative balance sheets and income statement follow, along
> Refer to the information in PA12-2. Required: Prepare the cash flows from operating activities section of the statement of cash flows using the direct method. The income statement and selected balance sheet information for Direct Products Company for
> Heads Up Company was started several years ago by two hockey instructors. The company’s comparative balance sheets and income statement follow, along with additional information. Additional Data: a. Bought new hockey equipment for cas
> XS Supply Company is developing its annual financial statements at December 31. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized: Additional Data: a. Bought
> The income statement and selected balance sheet information for Direct Products Company for the year ended December 31 are presented below. Required: Prepare the cash flows from operating activities section of the statement of cash flows using the indi
> Motif Furniture is an Austin-based furniture company. For each of the following first-quarter transactions, indicate whether operating (O), investing (I), or financing activities (F) are affected and whether the effect is a cash inflow (+) or outflow (&a
> Two online magazine companies reported the following in their financial statements: Required: 1. Compute the 2018 ROE for each company (express ROE as a percentage rounded to one decimal place). Which company appears to generate greater returns on stoc
> Ritz Company had the following stock outstanding and Retained Earnings at December 31, 2018: On December 31, 2018, the board of directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were decl
> At December 31, the records of Kozmetsky Corporation provided the following selected and incomplete data: Required: 1. Complete the following: Shares issued . Shares outstanding . 2. The balance in Additional Paid-In Capital would be $ . 3. Earnings
> BSO, Inc., has assets of $600,000 and liabilities of $450,000, resulting in a debt-to-assets ratio of 0.75. For each of the following transactions, determine whether the debt-to-assets ratio will increase, decrease, or remain the same. Each item is indep
> National Chocolate Corp. produces chocolate bars and snacks under the brand names Blast and Soothe. A press release contained the following information: Required: 1. Prepare any journal entries that National Chocolate Corp. should make on the four date
> What are the three points of the fraud triangle? Is fraud more or less likely to occur if one of these elements is missing?
> Cucina Corp. signed a new installment note on January 1, 2018, and deposited the proceeds of $50,000 in its bank account. The note has a three-year term, compounds 5 percent interest annually, and requires an annual installment payment on December 31. Cu
> Assume the same facts as PA10-7, except that Surreal uses the simplified effective-interest bond amortization method, as shown in Chapter Supplement 10C. Required: 1. Prepare a bond amortization schedule. 2. Give the journal entry to record the bond
> On January 1, 2018, Surreal Manufacturing issued 600 bonds, each with a face value of $1,000, a stated interest rate of 3 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 4 pe
> On January 1, 2018, Loop Raceway issued 600 bonds, each with a face value of $1,000, a stated interest rate of 5 percent paid annually on December 31, and a maturity date of December 31, 2020. On the issue date, the market interest rate was 6 percent, so
> Macromedia, Inc., is the original maker of shockwave and flash technologies. One of its annual reports indicated a lawsuit had been filed against the company and five of its former officers for securities fraud in connection with allegedly making false o
> Net Work Corporation, whose annual accounting period ends on December 31, issued the following bonds: Required: For each of the three independent cases that follow, provide the amounts to be reported on the January 1, 2018, financial statements immedia
> Lakeview Company completed the following two transactions. The annual accounting period ends December 31. a. On December 31, calculated the payroll, which indicates gross earnings for wages ($80,000), payroll deductions for income tax ($8,000), payroll
